Coinbase Global (COIN) CEO, Brian Armstrong, responded robustly to the legal allegations recently brought against his firm by the Securities and Exchange Commission (SEC). Despite the challenging situation, Armstrong expressed optimism, ensuring stakeholders that the situation would be resolved and that it was still “business as usual” for Coinbase.

SEC Accusations Against Coinbase

The SEC claims that Coinbase, the biggest cryptocurrency exchange in the United States, violated securities laws. According to the government, Coinbase operated as an exchange, broker, and clearing agency without being properly registered. Furthermore, the SEC claimed that Coinbase offered and sold securities without registering these offers and sales.

Brian Armstrong, however, repudiated these claims during his appearance at a Piper Sandler event, as well as on CNBC and CNN. He pointed out the fact that despite attempts to address the SEC's concerns and seek guidance, Coinbase was largely overlooked by the agency.

Armstrong on Regulatory Challenges

Armstrong expressed frustration with the regulatory environment, stating, “I don't really think there is a way to register, there's basically no way to do it. We've tried repeatedly in the US.” Coinbase, he highlighted, has met with the SEC over 30 times. His description of these meetings with the SEC was one of an “icy reception”.

In response to Armstrong's question about how Coinbase could achieve regulatory compliance, the SEC simply advised that the exchange should consult with its legal counsel, declining to offer any legal advice of its own.

Conflicts in the Crypto Regulatory Landscape

The Coinbase CEO dubbed the US crypto regulatory landscape as an “outlier” among nations. He noted the conflicting perspectives between the SEC and the Commodities Futures Trading Commission (CFTC) over which body should be regulating the spot crypto market, as no clear jurisdiction has been inscribed into law.

SEC chair Gary Gensler has consistently stated that cryptocurrency companies issuing or offering the sale of cryptocurrencies that are considered securities must register with the securities regulators or risk facing charges. These regulations are grounded in the Howey Test, a framework established by a 1946 Supreme Court case.

The SEC's Stance and Coinbase's Position

In the SEC's case against Coinbase, 13 cryptocurrencies traded on the exchange platform were deemed securities. The agency alleges that Coinbase violated securities laws by offering these securities for sale. Despite the SEC's allegations, Armstrong insisted that it's “business as usual” for Coinbase. The exchange plans to continue enabling trading in the assets the SEC identifies as securities.

Coinbase maintains a rigorous review process for its token listing, screening applicants with Howey test-related questions. The firm rejects 90% of received applications based on legal criteria. The SEC's allegations suggest that in the pursuit of growth and increased trading profits, Coinbase has chosen to list crypto assets with higher “risk” scores according to the Howey Test-like rating framework.

Looking Ahead

While the SEC continues to press for stricter regulatory compliance, Armstrong remains confident in the future of Coinbase. He assured that the firm is committed to resolving the current situation, emphasizing the continuation of normal operations. Despite the ongoing challenges, Armstrong's firm belief in his company and its future resonates, “This will get resolved,” he assured.

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